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July, 01st 2013
%                                     Judgment delivered on: 01.04.2013

+       ITA 607/2012

        COMMISSIONER OF INCOME TAX                                  ..... Appellant


        PVT. LTD.                                                ..... Respondent
Advocates who appeared in this case:
For the Appellant            : Mr Abhishek Maratha, Sr. Standing Counsel with Ms
                               Anshul Sharma, Advocate.
For the Respondent           : Mr C. S. Aggarwal, Sr. Adv. with Mr Vishal Kalra and
                               Mr Prakash Kumar, Advocates.




1.      This appeal by the revenue is directed against the order dated

21.04.2011 passed by the Income Tax Appellate Tribunal, New Delhi

in ITA No.3139/Del/2007 pertaining to the assessment year 2004-05.

The assessing officer had made an addition of `22.58 crores under

section 69 of the Income Tax Act, 1961 on account of alleged

unexplained investment. It was the case of the revenue that while the

ITA 607/2012                                                           Page 1 of 8
respondent/ assessee had disclosed that it had paid a sum of `41.80

crores, in fact, it had purchased assets worth `64.38 crores and,

therefore, there was an unexplained investment of `22.58 crores

(`64.38 crores minus `41.80 crores).

2.      The assessee had placed the value of the total assets purchased

by it by way of a slump purchase in the following manner: -

        "Total value of assets as recorded in the books of accounts

         S.No.          Particulars        Amount ` Crores
         1.      Plant & Machinery         13.82
         2.      Goodwill                  50.56
         3.      Total value               64.38"

3.      The sum of `41.80 crores was paid by discharge of the liabilities

as per Schedule III of the Business Transfer Agreement between the

respondent/ assessee and Dhillon Kool to the extent of `35.30 crores

and the remaining `6.50 crores was paid directly by the respondent/

assessee to the Dhillon Kool in terms of clause 6.3.3 of the Business

Transfer Agreement.

4.      Apart from the said sum of `41.80 crores, the respondent/

assessee had also taken over the liabilities as per Schedule II of the

ITA 607/2012                                                  Page 2 of 8
Business Transfer Agreement to the extent of `15.80 crores.                In

addition, the respondent/ assessee took on the liabilities/ loans against

specific assets taken over in terms of clause 1.1 of the Business

Transfer Agreement to the extent of `5.53 crores.           In fact, the

Commissioner of Income Tax (Appeals) as also the Income Tax

Appellate Tribunal have examined this issue at great length and have

concluded on facts that a sum of `5.53 crores was in respect of leased

assets taken over from Dhillon Kool. Finally, a transaction cost of

`1.25 crores which had been incurred and had duly been mentioned in

books, of accounts, formed part of the slump purchase. In this way,

the total figure of `6.78 crores (`5.53 crores plus `1.25 crores) was

arrived at.

5.      As against this, the plant and machinery was valued at `13.82

crores on fair value basis.    The balance amount of `50.56 crores

(`64.38 crores minus `13.82 crores) was treated as goodwill.

6.      The learned counsel for the revenue/ appellant contended that

while there is no dispute with regard to amount of `41.80 crores which

was actually paid by the assessee to Dhillon Kool as also with regard

to the sum of `15.80 crores which was mentioned in Schedule II of the

ITA 607/2012                                                 Page 3 of 8
Business Transfer Agreement and `1.25 crores towards transaction

costs, there is a dispute with regard to the sum of `5.53 crores which

has been allegedly incurred by the respondent/ assessee towards

liabilities in respect of assets referred to in clause 1.1 of the Business

Transfer Agreement. He submitted that the only liabilities that have

been mentioned in clause 1.1 are those which are indicated in Schedule

II to the Business Transfer Agreement. And, according to the learned

counsel for the appellant, the total extent of liabilities mentioned in

Schedule II to the Business Transfer Agreement is only `15.80 crores,

which does not include the sum of `5.53 crores and, therefore, to this

extent, the authorities below have erred in not including this figure.

7.      Mr Aggarwal appearing on behalf of the assessee submitted that

the figure of `5.53 crores has no mystery attached to it. He submitted

that the said sum is included in and referred to in the Business Transfer

Agreement itself. Clause 2.2.2 of the Business Transfer Agreement

specifically speaks of leased assets. The said clause reads as under: -

        "2.2.2       Leased Assets
        The Seller shall transfer to the Buyer all the rights, interest
        and benefits that the Seller has in the Leased Assets at
        closing to and in favour of the Buyer on the same terms
        and conditions as enjoyed by the Seller in respect of such

ITA 607/2012                                                     Page 4 of 8
        Leased Assets and shall be responsible to get all requisite
        paper work/ documentation executed by the concerned
        Lessor/s so as to perfect the title of the Buyer as lessee of
        such Leased Assets at closing."

8.      From the above extract it is apparent that the assessee acquired

all the rights, interests and benefits which the seller Dhillon Kool had

in the leased assets.     It was also indicated by Mr Aggarwal that

definition of "asset" in clause 1.1 of the Business Transfer Agreement

specifically included the assets set-out in Schedule I whether owned by

the seller or leased. He also drew our attention to paragraph 7 of the

order of the Commissioner of Income Tax (Appeals) wherein it is

specifically recorded that the assessee had taken over (a) the liabilities

of `15.80 crores and (b) the liabilities/ loans against specific leased

assets of `5.53 crores. The assessee had also incurred transaction costs

of `1.25 crores. Our attention was also drawn to the paragraph 12 and

13 of the Tribunal's order which reads as under: -

        "12. We have considered the rival contentions of both
        the parties and have carefully perused the orders of the
        authorities below. It is not in dispute that the value of
        the total assets taken over by the assessee from DKDB in
        pursuance to the business transfer agreement on slump
        sale basis has been determined by the assessee at `64.38
        crores, which has been allocated to the following assets:

ITA 607/2012                                                   Page 5 of 8
        (1)    Plant & Machinery               `13.82 crores

        (2)    Goodwill                        `50.56 crores

                                   Total       `64.38 crores

        The assessee had shown above assets to the extent of
        `64.38 crores and a corresponding entry has also been
        passed towards liabilities side after taking over various
        liabilities payable by the transferor. In this case, as per
        agreement, the net amount payable to DKDB was `41.80
        crores. Over and above the said amount of `41.80
        crores, the assessee company had taken the liability of
        the said company namely, DKDB to the tune of `15.80
        crores as set out in Schedule-II of the agreement.
        Further, the assessee had also taken over additional
        liability of `6.78 crores representing the liabilities of
        leased assets of `5.53 crores and transaction cost of
        `1.25 crore. All these corresponding entries have been
        passed by the assessee in its books of account at the
        opening date of the accounting year. The details of
        opening book entries as recorded in the books of account
        of the assessee have been perused by us, and on perusal
        thereof, we find that the assessee had shown the assets at
        `64.38 crores and a corresponding amount towards
        liabilities has also been shown.
        13. In schedule-II of the agreement, it has been clearly
        stated that the assessee had taken over the liability of
        `15.80 crores, over and above, the net lump sum price of
        `41.80 crores. The lump sum price of `41.80 crores was
        liable to be discharged by paying the seller's liability
        listed in Schedule-III to the extent of `35.30 as and when
        they would become payable and the balance purchase
        price of `6.5 crores shall be released or paid by the buyer
        in the manner as provided in Article 6.3.3 of the
        agreement. Article 6.3.2 provides that the sum of `11.60
        crores and `60,00,000/- towards sale and excise liability,

ITA 607/2012                                                   Page 6 of 8
        and statutory liability respectively shall be paid by the
        buyer directly to the statutory authorities on the signing
        of the agreement. In the accounts, the assessee had also
        shown liabilities taken over of `6.78 crores representing
        the liabilities of leased assets of `5.53 crores and
        transaction cost of `1.25 crores. Therefore, the total
        value of the assets corresponding to the liabilities taken
        over comes to following amount: -
               (1)   `41.80 crores payable to DKDB including
                     amount of certain liabilities set-out in
                     schedule-II of the agreement.
               (2)   `15.80 crores liability taken over as set out
                     in Schedule-II of the agreement.

               (3)   `6.78 crores Additional liability.

                     `64.38 crores"

9.      From the above extract it is apparent that the Tribunal had gone

to the extent of examining the books of the respondent/ assessee and

confirming that the opening entries in the books of the assessee after

the slump purchase had shown the assets at `64.38 crores as a result of

transfer from Dhillon Kool to the respondent/ assessee.          In other

words, the entire extent of `64.38 crores had been accepted both by the

Commissioner of Income Tax (Appeals) as also by the Tribunal.

These are clear findings of fact and, therefore, cannot be disturbed

unless and until some perversity is pointed. The learned counsel for

ITA 607/2012                                                  Page 7 of 8
the appellant has not been able to point out any perversity in these


10.     In view of the foregoing, we do not find any question of law

which arises for our consideration. The appeal is dismissed.

                                      BADAR DURREZ AHMED, J

                                                    R.V.EASWAR, J
APRIL 01, 2013

ITA 607/2012                                                   Page 8 of 8
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